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DECREE No

DECREE No.59-CP OF OCTOBER 3, 1996 OF THE GOVERNMENT ISSUING THE REGULATION ON FINANCIAL MANAGEMENT AND BUSINESS COST-ACCOUNTING AT STATE ENTERPRISES

THE GOVERNMENT

Pursuant to the Law on Organization of the Government of September 30, 1992;

Pursuant to the Law on State Enterprises of April 20, 1995;

At the proposal of the Minister of Finance,

DECREES:

Article 1.- To issue together with this Decree the "Regulation on Financial Management and Business Cost-accounting at State Enterprises," for uniform implementation throughout the country.

Article 2.- This Decree takes effect from the date of its signing. Only the provisions on profit distribution in Chapter IV of this Regulation shall take effect from January 1st, 1997.

The earlier provisions on financial management and business cost accounting of State enterprises (listed in the attached appendix and other relevant documents) which are contrary to this Decree are now annulled.

Article 3.- The Minister of Finance shall have to guide and supervise the implementation of the Regulation issued together with this Decree.

Article 4.- The Ministers, the Heads of the ministerial-level agencies and the agencies attached to the Government, the Presidents of the People�s Committees of the provinces and the cities directly under the Central Government; the Managing Boards, the General Directors and Directors of State enterprises engaged in business activities shall have to implement this Decree.

On behalf of the Government

For the Prime Minister

Deputy Prime Minister

PHAN VAN KHAI

REGULATION ON FINANCIAL MANAGEMENT AND BUSINESS COST-ACCOUNTING AT STATE ENTERPRISES
(issued together with Decree No.59-CP of October 3, 1996 of the Government)

Chapter I

GENERAL PROVISIONS

Article 1.- This Regulation shall apply to the State enterprises engaged in business operations, including: corporations and their member enterprises; other independent enterprises (hereafter referred to as State enterprises for short).

In addition to the provisions of this Regulation, each State corporation and its member enterprise shall also apply the provisions of its Financial Regulation issued by the corporation�s Managing Board and approved by the Ministry of Finance, which must be consistent with the Law on State Enterprises, with this Regulation and the model Financial Regulation of State corporations..

Article 2.- In this Regulation, the following terms shall be construed as follows:

1. "Prescribed capital of a State enterprise" is the minimum capital required by law for the establishment of a State enterprise in each business line.

2. "Statutory capital of a State enterprise" is the capital stated in the statute of a State enterprise.

3. "Mobilized capital of a State enterprise" is the capital mobilized by a State enterprise through issuing bonds, accepting capital contribution(s); borrowing capital from Vietnamese and foreign organizations and individuals and other forms as prescribed by law to serve its business activities.

4. "Assets of a State enterprise" include the tangible fixed assets; the intangible fixed assets; the mobile assets like materials, raw materials, fuel, goods, capital in cash, amounts to be collected, short-term and long-term financial investments, and expenditures for the completion of ongoing capital constructions.

5. "Investment outside a State enterprise" means that a State enterprise uses its assets or capital to buy shares, to contribute to a joint venture(s) and other investment forms as prescribed by law with a view to increasing its revenues or performing the State assigned tasks.

Chapter II

MANAGEMENT AND USE OF CAPITAL AND ASSETS

Article 3.- Part or the whole of the initial statutory capital of a newly established State enterprise shall be invested by a competent State agency but it must not be lower than the total prescribed capital of the business lines conducted by the enterprise.

Article 4.- During the course of business, when necessary, the State can consider and allocate additional investment capital to an enterprise to perform additional tasks assigned by the State.

When there is a change in its statutory capital a State enterprise must make public its new statutory capital according to the guidance of the Ministry of Finance. In cases where the statutory capital of an enterprise is lower than the prescribed capital set for the business lines conducted by the enterprise, the agency competent to decide the establishment of such enterprise must either allocate an additional capital to the enterprise or reduce its business lines or declare its bankruptcy in accordance with the Law on Bankruptcy.

In addition to its initial statutory capital, an enterprise must mobilize by itself more capital to develop its business and take responsibility for such a mobilization of capital. The State enterprise has the obligation to receive, manage and effectively use the capital and resources assigned by the State, continuously improve its business efficiency, preserve and develop its capital. It must take limited civil liability for its business activities before law within the amount of its capital, including the State-allocated capital.

Article 5.- The State shall allocate capital under its ownership to the newly-established independent enterprises or enterprises re-established by merging with or separating from other enterprises, and to corporations established by Decision No.90-TTg and Decision No.91-TTg of March 7, 1994 of the Prime Minister.

The capital allocated by the State to corporations shall also include the capital of their members.

Article 6.- An enterprise shall have the responsibility to:

1. - Open a ledger, accurately monitor all the assets and capital under its management and use them in accordance with current cost-accounting and statistical regimes, and report in time the use and fluctuation of its assets and capital.

2. Regularly examine and take stock of its debts, determine and categorize the debts not yet recovered and analyze the possibility of recovery so as to take appropriate measures.

Article 7.- The allocation of capital to State enterprises shall be conducted in accordance with the Law on State Enterprises and other current provisions of law. Upon handover and receipt of capital, the following must be ensured:

1. Re-appraising the value of assets according to the market prices at the time of the handover of capital;

2. With regard to independent enterprises re-established by merging with or separating from other enterprises, all remaining financial issues must be determined and thoroughly settled before they are allocated capital;

3. The delivery of capital must be carried out not later than 60 days after the enterprise is granted a business registration certificate;

4. The State financial agency shall be the deliverer of capital;

5. The Chairman of the Managing Board and the General Director or Director (for an enterprise with a Managing Board) or the Director (for an independent enterprise without a Managing Board) shall sign to the receipt of capital.

6. With regard to corporations established by Decision No.90-TTg and Decision No.91-TTg of March 7, 1994 of the Prime Minister, the handover and receipt of capital must be witnessed by the Head of the agency that decides the establishment of the enterprise.

Not later than 30 days after receiving the capital from the State, the corporation must reassign it to the member enterprises. Within 15 days after reassigning capital to its member enterprises, the corporation must notify the results of the capital reassignment to the State financial agency and the Head of the agency that decides the establishment of the enterprise.

Article 8.- A State enterprise shall be entitled to use its capital and/or funds for business purposes on the principle of efficiency, preservation and development of capital. If such capital sources and/or funds are used for purposes other than those already set for them, the principle of repayment must be observed. The use of capital and/or funds for investment and construction must abide by all the State regulations on the management of investment and construction.

Article 9.- A State enterprise shall be entitled to change its capital structure and assets for business development.

In a State corporation, the General Director shall preside over the transfer of assets among the member enterprises under the plan already approved by the Managing Board. Within 10 days after a transfer of assets is effected, the corporation must notify the results of the asset transfer to the State financial agency and the Head of the agency that decides the establishment of the enterprise.

Article 10.-

1. A State enterprise shall be entitled to use the capital and assets under its management to invest outside the enterprise. A land-related investment outside an enterprise must comply with the provisions of land legislation.

Investment outside an enterprise must comply with the provisions of law and ensure the principle of efficiency, preservation and development of capital and increase of income without affecting the major business tasks assigned by the State to the enterprises.

2. The Managing Board (for an enterprise with a Managing Board) or the Director (for an independent enterprise without a Managing Board) shall decide the plan on a joint venture with a Vietnamese party(ies). Where a State enterprise uses State-owned capital and assets as contribution to a joint venture with a foreign investor(s), the Managing Board (for an enterprise with a Managing Board) or the Director (for an independent enterprise without a Managing Board) shall submit such joint venture plan to the Head of the agency that decides the establishment of the enterprise for approval or decides itself/himself/herself if so mandated in writing by the Head of such agency. Within 15 days after the Head of the agency that decides the establishment of the enterprise approves or the enterprise decides by itself the joint venture plan, the enterprise must report it in writing to the State financial agency.

For an independent enterprise without a Managing Board, when using the State-owned capital and assets as contribution to a joint venture with private or collective owners, it must conduct a feasibility study or justify the joint venture plan which shall be considered and evaluated by a competent financial agency and must be approved by the Head of the agency that decides the establishment of the enterprise.

3. A State enterprise shall not be allowed to invest in a non-State enterprise where the chief executive officer or principal owner is a spouse, parent or offspring of the Chairman of the Managing Board, General Director or Director.

4. The Managing Board, General Director or Director (for an enterprise with a Managing Board), or the Director (for an independent enterprise without a Managing Board) shall have to appoint representatives to participate in the management, supervision and examination of the use of the capital contributed to another enterprise; shall take responsibility for the efficiency, preservation and development of the contributed capital, and for the collection of profits therefrom.

5. The purchase of shares must comply with current provisions of law.

Article 11.- Apart from the capital invested by the State, a State enterprise shall be entitled to mobilize capital in various forms viz. issuing bonds, borrowing, accepting capital contributions, and other forms. The capital mobilization must comply with the provisions of law, shall not alter the form of ownership of the enterprise and the total mobilized capital must not exceed its prescribed capital at the time of the latest announcement, except otherwise provided for by law or ordinance. In case of issue of shares to mobilize capital, current provisions of law must be complied with.

Article 12.- For a corporation, its General Director shall, with the mandate of its Managing Board, decide the mobilization of its fixed assets depreciation capital and the funds of its independent cost-accounting member enterprises to meet the corporation�s requirement of concentrated investment in the form of borrowing and repayment at an internal interest rate.

With regard to a number of specific cases defined in the corporation�s Statute on the organization and operation, the corporation may mobilize the fixed assets depreciation capital (excluding the depreciation of the fixed assets formed by unpaid loans) of its independent cost-accounting member enterprises on the principle of registering capital increase or reduction.

Article 13.- A State enterprise shall have to preserve its State-assigned capital in accordance with the following regulations:

1. Observing the State regime on the management and use of capital and assets;

2. Buying property insurance as prescribed;

3. Being allowed to put the following reserves into the business expenditure account:

a/ The reserve for the reduction of prices of inventories i.e. the reduction of the prices of unsold supplies and goods projected for the subsequent business cycle.

b. The reserve for the reduction of the value of bad debts i.e. the projected lost value of debts to be recovered, which may occur in the subsequent business cycle because the debtors are unable to repay.

c. The reserve for the reduced value of various types of stocks in financial activities.

The Ministry of Finance shall guide the setting up and use of the reserves defined in Item 3 of this Article.

Article 14.-

1. A State enterprise shall re-appraise its assets in the following cases:

a. Inventorying and re-appraising its assets by decision of the State;

b. Equitizing and diversifying its ownership form;

c. Using its assets to enter into joint venture, contribute shares (upon the contribution or return of assets);

d. Adjusting the prices to ensure the real value of its assets.

2. The inventory-taking and re-appraisal of assets must comply with the State regulations. Any increase or decrease in the value of an enterprise�s assets as a result of the reappraisal shall be accounted for in the State capital at the enterprise.

Article 15.- A loss of a State enterprise�s assets is a loss or damage which reduces the value of the enterprise�s assets due to subjective or objective causes.

The enterprise concerned must clearly identify the causes of the asset loss, the value of the loss and take concrete remedy solutions.

1. For losses due to subjective causes, the enterprise must identify the extent of the loss caused by each person involved and force him/her to compensate.

2. For losses due to objective causes, the Managing Board (for an enterprise with a Managing Board) or the Director (for an independent enterprise without a Managing Board) shall draw up a plan to deal with the asset loss and submit it to the financial agency which shall have to consult the Head of the agency that decides the establishment of the enterprise for decision or report it to the Prime Minister for decision.

An enterprise shall be entitled to use its financial reserve fund to make up for any asset incurred by it after the loss has been settled.

Article 16.- A State enterprise shall depreciate its fixed assets on the principle that the depreciation must make up for both intangible and tangible wear of the assets. The Minister of Finance shall issue the regime on the depreciation of fixed assets to encourage rapid depreciation and provide conditions for enterprises to quickly modernize and renovate their technologies.

An enterprise may use the depreciation of its fixed assets to reinvest, replace or renew its fixed assets and meet other business requirements as prescribed by the State.

Article 17.-

1. A State enterprise shall be entitled to lease, mortgage or pledge the assets under its management on the principle of efficient use, preservation and development of capital and ensuring the procedures prescribed by the State.

2. The use of assets for lease, mortgage or pledge must comply with the provisions of the Civil Code and other State regulations.

3. If an enterprise wants to lease, mortgage or pledge its State-owned assets that constitute a major part or the whole of the main technological chain or assets of great value as stipulated by the Ministry of Finance, such lease, mortgage or pledge must be first evaluated by a competent financial agency and then considered and decided by the Head of the agency that decides the establishment of the enterprise.

Article 18.-

1. An enterprise shall be entitled to take the initiative in selling its assets to retrieve capital and use it for more effective business purposes. If an enterprise wants to sell any of the assets defined in Item 3, Article 17 of this Regulation to foreign organizations or individuals permission from the Prime Minister is required.

2. When selling its assets, an enterprise must determine the price of the assets and hold an auction as prescribed by law.

3. The difference between the earnings from the sale of assets and the remaining value of the sold assets plus the sale costs shall be accounted for in the enterprise�s business results.

Article 19.-

1. An enterprise shall be entitled to liquidate assets of poor or deteriorating quality, technically obsolete or unusable, or irreparably damaged. If an enterprise wants to liquidate any of the assets defined in Item 3, Article 17 of this Regulation it must ask for a written permission from a competent financial agency and the Head of the agency that decides the establishment of the enterprise.

2. Upon liquidation of its assets, an enterprise must set up a Liquidation Council. If it wants to sell the liquidated assets, it must hold an auction as prescribed by law.

3. The difference between the earnings from the liquidation of assets and the remaining value of the liquidated assets plus the liquidation cost must be accounted for in the enterprise�s business results.

Chapter III

TURNOVER, COSTS AND BUSINESS RESULTS

Article 20.- The turnover of business operations includes all the sales of products, goods and the provision of services on the market after deducting the costs of sale, the reduction of the sale prices, and the returned goods (with valid documents); the price subsidies from the State when it supplies goods or services at the request of the State.

Products, goods and services which are donated, presented, given away or consumed within an enterprise shall be also accounted for in determining the turnover.

The moment for determining the turnover is the time when a buyer accepts payment, whether it is received or not.

Article 21.- The turnover of other operations includes:

Revenues deriving from investment outside an enterprise, trading in bonds debentures and shares; lease of assets; joint ventures and share contributions; cooperation activities; interests on deposits and loans; collection of fines, recovery of forgiven debts, unused amounts of the reserves deducted from the preceding years, and other revenues.

Article 22.- If an enterprise suffers losses when performing the duties of production or provision of services for defense and security purposes, preventing and fighting against natural calamities or supplying products or services under the State pricing regime, without earning enough to make up for the production costs of those products and services, it shall be entitled to the regime of allowances, price subsidies or other State preferential regimes

1. When performing the above-mentioned tasks all the following conditions must be ensured:

a/ The tasks are assigned by the State (decided by the Government or, by Government mandate given to the Minister of the Ministry managing the economic-technical branch or the President of the People�s Committee of a province or city directly under the Central Government, who shall make the decision, after consulting with the Minister of Finance);

b/ Satisfying the terms on time, quantity, quality and price.

2. The Ministry of Finance shall stipulate a detailed regulation on the allocation of allowances and price subsidies from the State budget.

Article 23.- An enterprise must account all the following expenditures arising in a fiscal year:

1. Business expenditures of the enterprise including:

a/ Cost of materials and raw materials i.e. the value of all the materials and raw materials which the enterprise uses in business operations;

b/ Cost of fuel and power i.e. the value of all the fuels and power already used in business operations by the enterprise;

c/ Salaries i.e. all the salaries, wages and other payable salary-related costs;

d/ Deductions as prescribed by the State such as social insurance, medical insurance and trade union expenditures;

e/ Depreciation of fixed assets i.e. the depreciation deducted as prescribed of all the fixed assets of the enterprise;

f/ Cost of services procured from outside i.e. are all the expenditures paid to organizations and individuals outside the enterprise for their services provided at the enterprise�s request such as transportation, electricity and water supply, telephone, repair of fixed assets, consultancy, auditing, advertisement, property insurance, brokerage, agential activities, import-export by trust and other services;

g/ Other pecuniary expenditures include the license tax, the land use tax or land rent, natural resource tax, housing tax; spendings on reception and external relation activities; labor insurance cost, interests on borrowings for business purposes; deductions to fund the managerial cost of the higher level; contributions to the professional association of which the enterprise is a member and other expenditures.

h/ Other expenditures which the enterprise shall be allowed to account for in the business expenditures:

- The price reduction reserves deducted under Item 3, Article 13 of this Regulation;

- Severance allowances for laborers as prescribed in Decree No.198-CP of December 31, 1994 of the Government stipulating in detail and guiding the implementation of a number of Articles of the Labor Code on labor contracts.

2. Other operational costs of an enterprise include:

The cost of the trading in bonds, debentures and shares; asset hiring cost; the cost of joint venture, cooperation and share contribution activities, expenses in the recovery of forgiven debts; expenses on the collection of fines; and other costs.

Article 24.- An enterprise shall not be permitted to account in its business operations and other expenditures the following spendings:

1. Losses in joint venture and/or cooperation activities, losses in other investment activities;

2. Damage compensations subsidized by the Government or paid by the damaging party(ies) or insurance companies;

3. Spendings for overseas trips, which are in excess of the prescribed expenses set by the State;

4. Expenditures which should be covered by the non-business fund, the welfare and reward funds;

5. Regular and irregular difficulty allowances;

6. Rewards such as productivity reward, innovation reward, thrift reward, emulation reward (these rewards derive from the reward fund of the enterprise);

7. Lunch allowances (if any)

8. Donations to the local authorities, mass and social organizations and other agencies;

9. Expenditures for investment in capital construction, purchase of fixed assets and other investment expenditures;

10. Expenses on specialists� service in capital construction projects or scientific research or training projects covered by other funding sources;

11. Expenditures covered by other funding sources.

Article 25.- Determination of the production cost of products and services:

1. The production cost of products and services includes:

a/ Cost of direct materials i.e. the cost of raw materials, fuel and materials directly used for the creation of products and services;

b/ Cost of direct labor including salaries, wages and deducted sums of workers directly producing goods and services payable by an enterprise as prescribed.

c/ General production costs including the expenditures for production and processing activities of workshops (or business units) directly producing goods and services such as the costs of materials, small working tools, depreciation of the fixed assets of the workshops (business units); salaries and prescribed deductions from salaries of the personnel, cost of services procured from outside, other pecuniary costs arising in the workshops (business units).

2. The total cost of goods or services already consumed include:

a/ Production cost of goods or services already consumed;

b/ Sale cost i.e. all the costs related to the sale of products and services including the cost of product warranty;

c/ Managerial cost including the expenditures on the enterprise�s executive and managerial apparatus, expenditures related to the business operations of the enterprise such as the cost of small working tools, depreciation of fixed assets in service of the enterprise�s executive and managerial apparatus; salaries and prescribed deductions from the salaries of the enterprise�s executive and managerial apparatus; costs of services procured from outside; other pecuniary expenses arising in the enterprise like expenditures on reception and public and external relation activities, severance allowances for laborers as prescribed in Decree No.198-CP of December 31, 1994 of the Government stipulating in detail and guiding the implementation of a number of articles of the Labor Code; price reduction reserves deducted under Item 3, Article 13 of this Regulation; deductions to fund the managerial cost of the higher level, and other expenditures.

Article 26.- An enterprise must formulate and organize the implementation of the economic-technical norms (such as the norm for the consumption of materials, raw materials and fuel, the labor norm and the norms for indirect expenses) suitable to its business organization and economic-technical characteristics as well as the level of its equipment and facilities while ensuring thrift, reducing prices and increasing labor productivity and product quality.

Article 27.-

1. An enterprise shall formulate by itself the labor norms for individuals and sections and the overall norm under the guidance of the Ministry of Labor, War Invalids and Social Affairs. The State corporations and independent State enterprises categorized as special enterprises must register their labor norms with the Ministry of Labor, War Invalids and Social Affairs, other State enterprises must register their labor norms with the Head of the agency that decides the establishment of the enterprise.

2. On the basis of its registered labor norms and the salary regime prescribed by the State, an enterprise shall formulate its salary unit price per unit of product or service and submit it to the competent agency for approval.

Periodically, the competent agencies shall check the labor norms and salary unit price of an enterprise against its labor productivity growth rate and salaries so as to make appropriate adjustments.

3. The total payroll of employees and workers in an enterprise (including the Managing Board and Control Commission, if any) must be computed on the basis of the salary price unit and business results of the enterprise (the volume of products turned out or services provided). Even if an enterprise faces with difficulties in its business activities, it still has to ensure the minimum basic salary for its employees and workers.

The use of the salary fund for other purposes is strictly forbidden.

Article 28.-

1. An enterprise shall set by itself the norms for spendings on receptions, meetings and public and external relation activities. For an enterprise with a Managing Board, its Managing Board shall decide the concrete level for public and external relations expenses; for an enterprise without a Managing Board, its Director shall have to consult in writing with the State financial agency before he/she can make such spendings. These expenditures must be supported by valid documentation, associated with the business results and must not exceed the maximum level determined in percentage (%) of the partially progressional turnover according to the following rates:

Turnover of up to 5 billion VND: the actual expenditure shall not exceed 5% of the actual turnover;

Turnover of more than 5 billion VND to 10 billion VND: the additional expenditure shall not exceed 2% of the increased amount of turnover;

Turnover of more than 10 billion VND to 50 billion VND: the additional expenditure shall not exceed 1% of the increased amount of turnover;

Turnover of more than 50 billion VND to 100 billion VND: the additional expenditure shall not exceed 0.5% of the increased amount of turnover;

Turnover of more than 100 billion VND to 500 billion VND: the additional expenditure shall not exceed 0.2% of the increased amount of turnover;

Turnover of more than 500 billion VND: the additional expenditure shall not exceed 0.1% of the increased amount of turnover;

2. Expenditures on labor insurance, skill training and fostering must be based on the prescribed regime and level of expenditures.

3. The member enterprises of a corporation shall make deductions to fund the managerial expenses of the corporation by decision of its General Director on the basis of the plan approved by the corporation�s Managing Board. If the corporation does not use up the fund, it can carry forward the left-over to the subsequent year and if it overspends the fund, the excessive expenditure can be accounted for in the business expenditures of the year.

Article 29.- For each service procured from outside an enterprise there must be a draft cost estimate and an economic contract. The service shall be accepted upon testing and its contract shall be liquidated according to the price prescribed by the State (for services priced by the State) or the market price if there are receipts and/or valid documentation.

The payment of the brokerage commission must depend on the economic efficiency brought about by the brokerage. The Director of an enterprise shall decide and take responsibility for such expenditures. The brokerage commission shall not apply to the objects that are the enterprise�s agents, nominated customers, managerial titles and employees performing the duty of supplying materials and marketing products.

Article 30.- The profit made in a year is the business result of an enterprise, including the profit from business operations and the profit from other operations:

1. The profit from business operations is the difference between the turnover of business activities minus the total cost of products, goods or services already consumed and taxes paid under the provisions of law (except the profit tax).

2. The profit from other operations is the difference between the revenues from other activities minus the cost of such activities and taxes paid under the provisions of law (except the profit tax).

Article 31.- Independent State enterprises shall enjoy financial autonomy, take responsibility for their business operations, self-finance to ensure profits, take responsibility for profits and losses in business.

Chapter IV

PROFIT DISTRIBUTION

Article 32.- The profit made in a year of an enterprise shall be distributed according to the following order:

1. To pay the profit tax as prescribed by law;

2. To pay a fee for the use of the State budget capital;

3. To pay fines for violations of the discipline of the budget revenue collection, fines for administrative violations, breaches of contracts and overdue debts, lawful expenditures not yet refunded at the time when the payable profit tax is determined;

4. To make up for losses not yet subtracted from the pre-tax profit;

5. With regard to State enterprises doing business in a number of specific branches which must, as prescribed by law, set up special funds from their profits, after having paid the amounts defined in Items 1, 2, 3 and 4 above they must make deductions to set up these funds according to the rates prescribed by the State.

6. The remaining profit, after the amounts defined in Items 1, 2, 3, 4 and 5 (if any) of this Article are deducted, shall be subtracted to set up various funds according to the following rates::

a/ The development investment fund: the minimum deduction rate is 50%;

b/ The financial reserve fund: Deduction rate is 10% and the maximum balance of this fund must not exceed 25% of the statutory capital;

c/ The reserve fund for severance allowances: Deduction rate is 5% and the fund shall not exceed the effected payroll of 6 months.

d/ The remaining profit, after deductions are made to set up all the above-mentioned funds, shall be subtracted by the enterprise to set up the welfare and reward funds as prescribed.

- The maximum deduction shall not exceed the actual payroll of 3 months if the profit-to-investment ratio of the current year is not lower than that of the preceding year.

- The maximum deduction shall not exceed the actual payroll of 2 months if the profit-to-investment ratio of the current year is lower than that of the preceding year.

Of the total profit deducted to set up these two funds, the Managing Board (for an enterprise with a Managing Board), the General Director or the Director (for an independent enterprise without a Managing Board) shall, after consulting the enterprise�s Trade Union, decide a proper rate of distribution to each fund.

The remainder of the profit, if any, after deductions are made to set up the reward and welfare funds shall be remitted to the development investment fund.

Article 33.- Uses of the funds:

1. The development investment fund shall be used to develop business (including joint ventures, share contributions, purchase of shares as defined in Article 10 of this Regulation); renovate machinery, equipment and technological chains; research in the application of scientific and technical advances; support skill training and improve the working conditions in the enterprise; be deducted to set up the development investment fund and the scientific research and concentrated training fund (if any) of the corporation (if the enterprise is a corporation member) according to the rates decided by the Managing Board of the corporation.

In case of necessity, the State has the right to mobilize part of the development investment fund of an enterprise for the purpose of development investment in another State enterprise.

2. The financial reserve fund shall be used to make up for asset losses or damages suffered by an enterprise during the course of its business and deducted to form the financial reserve fund (if any) of the corporation (if the enterprise is a member of the corporation) according to the rates decided by the Managing Board of the Corporation.

3. The reserve fund for severance allowances shall be used for the training of employees and workers as required by the change in the enterprise�s organizational structure or technology and the training in optional jobs for female laborers in the enterprise, fostering and improving professional qualifications of laborers in the enterprise, providing allowances for laborers who work in the enterprise on a regular basis but now lose their jobs under Decree No.72-CP of October 31, 1995 of the Government stipulating in detail and guiding the implementation of a number of Articles of the Labor Code on employment; shall be deducted to form the reserve fund for severance allowances (if any) of the Corporation (if the enterprise is a member of a corporation) according to the rates decided by the Managing Board of the Corporation.

4. The reward fund shall be used to:

a/ Give year-end or regular bonuses to employees and workers in the enterprise. The value of the bonuses shall be decided by the Managing Board (for an enterprise with a Managing Board) at the proposal of the General Director or the Director and the Trade Union of the enterprise on the basis of the labor productivity and the work achievements of each employee or worker in the enterprise. For an independent enterprise without a Managing Board, its Director shall decide, after consulting the enterprise�s trade union, the bonus value.

b/ Give irregular rewards to individuals and collectives in the enterprise that have made technical innovations that yields efficiency in business. The value of a reward shall be decided by the Managing Board (for an enterprise with a Managing Board), the Director (for an independent enterprise without a Managing Board).

c/ Give rewards to individuals and units outside the enterprise that have fulfilled well the terms of economic contracts signed with the enterprise or have made great contributions to the enterprise�s business operations. The value of a reward shall be decided by the Managing Board (for an enterprises with the Managing Board), the Director (for an independent enterprise without a Managing Board).

d/ Be deducted to form the concentrated reward fund (if any) of the corporation according to the rates decided by the corporation�s Managing Board.

5. The welfare fund shall be used to:

a/ Invest in building or repairing welfare facilities of the enterprise.

b/ Finance public welfare activities of the collective of employees and workers, social welfare.

c/ Contribute part of its capital to the investment in building common welfare projects of the branch or other welfare projects contracted with other units.

d/ Be deducted to form a concentrated welfare fund (if any) of the corporation according to the rates decided by the corporation�s Managing Board.

e/ Besides, the Managing Board (for an enterprise with a Managing Board) or the Director (for an independent enterprise without a Managing Board) and the enterprise�s trade union may use part of the welfare fund to provide allowances to laborers with unexpected difficulties, such as persons who have retired or have had to quit their jobs due to poor health and now meet with difficulties without any support, or for social charity purposes.

The use of the welfare fund shall be decided by the Managing Board (for an enterprise with a Managing Board) or the Director (for an independent enterprise without a Managing Board) after consulting the enterprise�s trade union.

Article 34.- The State corporations shall make deductions to set up and use their concentrated funds in accordance with their Statutes on the Organization and Operation already approved and their Financial Regulations issued by their Managing Boards after they are adopted by the Minister of Finance.

Chapter V

ACCOUNTING, STATISTICAL AND AUDITING REGIMES

Article 35.- State enterprises must organize and implement its accounting and statistical work in accordance with the provisions of the State�s current legislation:

+ Making full documentation from the beginning;

+ Updating accounting records;

+ Accountancy must be done in a full, honest, accurate and objective manner.

Article 36.- At the end of a fiscal year, a State enterprise must:

+ Draw up on schedule the financial statements and statistical reports in accordance with current regulations. The enterprises shall conduct internal audit of their own financial statements or hire an independent auditor if they deem it necessary. The Director or the Managing Board (if any) of an enterprise shall take responsibility for the accuracy and authenticity of these statements and reports.

+ Make public the business results, assets, capital and debts of the enterprise. The Ministry of Finance shall guide the enterprises in making public financial data and statements.

+ Send on schedule the financial statements and statistical reports to competent agencies in accordance with current regulations.

+ Submit its financial statements to inspection, examination and supervision by a competent financial agency.

A fiscal year starts on January 1st and ends on December 31st of the solar calendar year.

Article 37.- Any arising economic activity shall be reflected in Vietnam Dong, any foreign currency(ies) involved must be converted into Vietnam Dong at the official rate announced by the State Bank of Vietnam at the moment the operation takes place.

Chapter VI

RESPONSIBILITIES OF THE MANAGING BOARDS, GENERAL DIRECTORS, DIRECTORS AND STATE MANAGEMENT AGENCIES IN THE FINANCIAL MANAGEMENT OF STATE ENTERPRISES

Article 38.- The responsibilities of the Managing Board of a State enterprise:

1. The Managing Board shall perform the function of managing its enterprise. It shall, within the scope of its jurisdiction, organize the implementation, check and monitor the financial activities of the enterprise.

2. To receive the capital, land, natural and other resources assigned to the enterprise by the State;

3. To submit the plans on joint ventures with foreign investors to the Head of the agency that decides the establishment of the enterprise for approval;

4. To approve the plans, proposed by the General Director or the Director, on the use, preservation and development of capital and on the use of the profit after remittances are made to the budget, to approve the annual financial statements made by the member enterprises; to make public annual financial statements as prescribed; to adopt long-term and annual financial plans submitted by the General Director or Director.

5. To decide the plan on the mobilization of capital in service of business activities while keeping the enterprise�s ownership form unchanged.

6. To examine and supervise the General Director, Directors and member units in the use, preservation and development of capital, fulfill the obligations toward the State as well as the objectives assigned by the State to the enterprise; and

To fulfill other obligations as prescribed by the State.

Article 39.- The responsibilities of the General Director or Director of a State enterprise:

1. In his/her capacity as a legal person representative of the enterprise, the General Director or Director of an enterprise has the highest executive power in the enterprise and takes responsibility before the Managing Board, the Head of the agency that decides the establishment of the enterprise and before law for running the enterprise�s operation;

2. Together with the Chairman of the Managing Board to sign the receipt of the capital, land, natural and other resources and manage and use them in accordance with the objectives and tasks assigned by the State.

3. To take responsibility for managing the use of capital in business in accordance with the plan on the use, preservation and development of capital adopted by the Managing Board (for an enterprise with a Managing Board); to implement the plan on profit distribution after remittances are made to the budget as prescribed.

4. To take responsibility before the State for the mobilization and use of various capital sources for business activities; to appoint persons in charge of the capital invested in joint ventures and/or business cooperation with other enterprises; to take material responsibility for damage caused to the enterprise due to his/her own fault.

5. To formulate spending norms compatible with the business conditions of the enterprise as prescribed by law.

6. To take responsibility for the data in the financial statements, the settlement data and other financial information.

7. To draw up long-term and annual financial plans in accordance with the business plan and submit them to the Managing Board for approval (for an enterprise with a Managing Board) and register them with a State financial agency.

To fulfill other responsibilities as defined by the State.

Article 40.- The Ministry of Finance has the function of State management over finance and accounting; it performs the functions and tasks and exercise powers as defined by the Government.

The Ministry of Finance shall have to coordinate with the Ministries managing the economic-technical branches, the People�s Committees of the provinces and the cities directly under the Central Government in managing the finance of State enterprises.

On behalf of the Government

For the Prime Minister

Deputy Prime Minister

PHAN VAN KHAI

APPENDIX

LIST OF INVALIDATED DOCUMENTS OF THE GOVERNMENT

(issued together with Decree No.59-CP of October 3, 1996 of the Government)

1. Decision No.217-HDBT of November 14, 1987 of the Council of Ministers on a number of policies to renew the business accounting regime in State owned enterprises.

2. Decision No.144-HDBT of May 10, 1990 of the Council of Ministers on the strengthening of the financial management of State-owned enterprises.

3. Decision No.315-HDBT of September 1st, 1990 of the Council of Ministers on the strengthening and reorganization of production and business in the State-owned economic sector.

4. Directive No.408-CT of November 20, 1990 of the Council of Ministers on the continued strengthening of the financial, accountancy work and business cost-accounting of State-owned enterprises.

5. Decision No.332-HDBT of October 23, 1991 of the Council of Ministers on the preservation and development of the business capital of State enterprises.

6. Decision No.378-HDBT of November 16, 1991 of the Council of Ministers on measures to settle the working capital of State enterprises.

7. Decision No.179-TTg of December 22, 1992 of the Prime Minister on the management and use of the basic depreciation capital.

8. Decree No.50-HDBT of March 22, 1988 of the Council of Ministers issuing the Statute of the State-owned industrial enterprises.

9. Decree No.27-HDBT of March 22, 1989 of the Council of Ministers issuing the Statute of the Union of State-owned enterprises.

10. Decision No. 202-HDBT on the salaries of workers and employees engaged in production and business in the State-owned and joint State-private economic sectors.

11. Decision No.195-HDBT of December 2, 1989 of the Council of Ministers on the issue of supplementary provisions to Decision No.217-HDBT of November 14, 1987 of the Council of Ministers.

12. Other documents of the Government issued in relation to the financial management and business cost-accounting regime for State enterprises which are contrary to this Decree.-

DECREE No.60-CP OF OCTOBER 7, 1996 OF THE GOVERNMENT ON THE GOVERNMENT�S GUIDANCE AND INSPECTION OVER THE PEOPLE�S COUNCILS IN THE IMPLEMENTATION OF LEGAL DOCUMENTS OF THE HIGHER-LEVEL STATE AGENCIES

THE GOVERNMENT

Pursuant to the Law on Organization of the Government of September 30, 1992;

Pursuant to the Law on Organization of the People�s Councils and People�s Committees (amended) of June 21, 1994;

Pursuant to the Ordinance on the Supervision and Guidance by the National Assembly Standing Committee, Guidance and Inspection by the Government over the People�s Councils of February 15, 1996;

At the proposal of the Minister-Chairman of the Government Commission on Organization and Personnel,

DECREES:

Article 1.- The legal documents issued by the higher-level State agencies mentioned in the Ordinance on the Supervision and Guidance by the National Assembly Standing Committee, Guidance and Inspection by the Government over the People�s Councils comprise: the Constitution, Codes, laws, resolutions of the National Assembly; ordinances, resolutions of the National Assembly Standing Committee; orders, decisions of the President of the State; resolutions, decrees of the Government; decisions, directives of the Prime Minister; decisions, directives, circulars of the Ministers, the Heads of the ministerial-level agencies and the Heads of the agencies attached to the Government; and inter-ministerial and inter-branch circulars.

With regard to the district and commune People�s Councils, in addition to the above-said legal documents, the legal documents of the higher-level State agencies also include: resolutions of the People�s Councils, decisions and directives of the higher-level People�s Committees.

Article 2.- The Government shall promulgate Decrees providing for issues that fall within its tasks and powers and Decrees detailing or guiding the enforcement of laws and resolutions of the National Assembly, ordinances and resolutions of the National Assembly Standing Committee, orders and decisions of the President of the State. The Prime Minister shall issue decisions and directives to direct, guide and promote the enforcement of laws and ordinances; and organize the collection of opinions and comments in the elaboration of Codes, laws and ordinances.

The Government shall organize conferences to popularize laws, ordinances and legal documents of the Government and the Prime Minister or specialized training courses on their implementation.

The Government assigns the provincial People�s Committees to organize the popularization of and training on the implementation of laws, ordinances and legal documents of the Government and the Prime Minister for the lower-level People�s Councils.

Article 3.- The Ministers, the Heads of the ministerial-level agencies and the agencies attached to the Government shall, basing themselves on the laws, ordinances and legal documents of the State and directives of the Government and the Prime Minister, issue circulars to provide detailed guidance on the above documents regarding matters within their branches and domains of work for implementation by the People�s Councils.

Article 4.- Annually, the Ministries, the ministerial-level agencies and the agencies attached to the Government shall, basing themselves on the Resolutions of the National Assembly and working programs of the Government, provide guidance to the People�s Councils on matters related to the domains of work under their charge, focusing mainly on the socio-economic development plans, the draft budget and ratification of the budget accounts, the work of ensuring security and defense, and social order and safety in the localities.

The above-mentioned guiding documents must be sent to the People�s Councils at least 20 days before the date of opening the first People�s Council�s session in the year.

Article 5.- Regarding the budget issue, the Government shall provide guidance for the People�s Councils to perform their tasks and exercise their powers in accordance with Article 25 of the Law on State Budget, as follows:

1. The People�s Council shall decide the local draft budget on the basis of the sources of revenues and spending tasks already assigned to the locality as well as the current regimes and policies.

2. The People�s Council shall decide the draft budget concerning the increase of expenditures or additional expenditures, consider and decide measures to ensure the budget balance.

3. The People�s Council shall consider and ratify the local budget accounts.

4. The People�s Council shall perform the function of supervising the budget revenues and expenditures in the locality.

Article 6.- In each term of the People�s Council, the Government shall organize training courses for deputies to the provincial People�s Council on policies, legislation and State management skill.

The Government authorizes the Government Commission on Organization and Personnel to elaborate the contents, programs, plans and organization of the refresher courses on policies, legislation and State management skill for deputies to the provincial People�s Council as well as training courses for lecturers of such courses to be organized by the provincial People�s Committee.

The provincial People�s Committee shall organize refresher courses on policies, legislation and State management skill for deputies to the district and commune People�s Councils in accordance with the Government�s guidance.

Article 7.- Basing itself on the State regulations on organization, personnel and assisting apparatus of the Standing Board of the People�s Council and the wage regime for the positions and titles of standing members and the various sections of the People�s Council; on the regime of allowances for the deputies to the People�s Council, the Government shall provide guidance to the People�s Council in the form of legal documents of the Government and the Prime Minister. The Ministry of Finance, the Government Commission on Organization and Personnel shall provide detailed guidance for the implementation of the above contents assigned by the Government.

Article 8.-

1. The Government shall provide guidance for the Standing Board of the provincial People�s Council in observing the regime of periodical reporting every 6 months and annually to the National Assembly Standing Committee and the Government, on the following:

- Activities of the provincial People�s Council and the implementation of its resolutions.

- The implementation of legal documents of the higher-level State agencies.

- The performance of tasks and powers of the People�s Council regarding the consideration and decision of draft budgets; the situation of budget revenues and expenditures and measures to achieve budget balance; the supervision of budget revenues and expenditures and ratification of the local budget accounts.

In case of urgent socio-economic problem in the locality, the concerned People�s Council shall have to immediately report it to the Government, proposing measures for settlement and at the same time asking for the Government�s direction or for permission to let the locality settle the problem.

2. The lower-level People�s Council shall report to the higher-level People�s Council on the contents stipulated in Item 1.

3. The Government shall send to the provincial People�s Council: resolutions and decrees of the Government, decisions and directives of the Prime Minister concerning activities of the local administration; the Ministers, the Heads of the ministerial-level agencies and the agencies attached to the Government shall send to the provincial People�s Council legal documents of their Ministries and agencies concerning the People�s Councils� activities.

The immediate higher People�s Committee shall have to send copies of the related legal documents to the lower-level People�s Council, except for those legal documents not allowed to be copied.

Article 9.- Periodically or at the request of the Prime Minister, the President of the State or of the National Assembly Standing Committee, the Government shall set up delegations to inspect execution of legal documents issued by the higher-level State agencies by the People�s Councils. Depending on the requirements and concrete tasks, the Prime Minister shall decide the composition of the inspection delegation.

The inspection delegation shall carry out the Government�s decision on the objects and contents of inspection, report the inspection results and propose solutions to the Government.

Article 10.- After receiving proposals from the inspection delegation, the People�s Council shall have to consider and solve matters discovered and proposed by the inspection delegation and reply in writing to the inspection delegation.

In case of necessity, the People�s Council may convene an extraordinary meeting to consider and solve matters proposed by the inspection delegation.

Article 11.- The Ministers, the Heads of the ministerial-level agencies and the agencies attached to the Government shall set up their own inspection delegations or coordinate with one another in setting up inter-branch inspection delegations to inspect the People�s Council in the implementation of legal documents of the higher-level State agencies, including:

- Inspecting the contents of resolutions promulgated by the People�s Council to implement the provisions of legal documents of the higher-level State agencies and legal documents relating to the branches or domains of work of the Ministries, the ministerial-level agencies or the agencies attached to the Government,

- Inspecting the contents of the resolutions promulgated by the People�s Council within its jurisdiction related to the regulations of the Ministries, the ministerial-level agencies and the agencies attached to the Government.

Article 12.- Through the inspection of resolutions of the People�s Council on the implementation of legal documents of the higher-level State agencies, if a content of a resolution of the People�s Council is found contrary to legal documents of the higher-level State agencies, the Ministers, the Heads of the ministerial-level agencies and the agencies attached to the Government shall have the right to propose to the Prime Minister the suspension of the execution of the whole resolution or a number of inappropriate points of the resolution of the provincial People�s Council, and at the same time notify such People�s Council thereof.

Article 13.- At the proposals of the Ministers, the Heads of the ministerial-level agencies and the agencies attached to the Government, or the Vietnam Fatherland Front, the Prime Minister shall decide to suspend the execution of the resolution of the provincial People�s Council if such a resolution has contents contrary to the Constitution, laws, ordinances or legal documents of the higher-level State agencies and propose that the National Assembly Standing Committee annul or amend such resolution.

The President of the People�s Committee shall have the right to suspend the execution of a resolution of the immediate lower-level People�s Council if such resolution has contents contrary to the Constitution, laws, ordinances or legal documents of the higher-level State agencies and propose that the People�s Council of the same level annul or amend such resolution.

The decision of the competent State agency to suspend the execution of the resolution of the People�s Council must clearly state the full or partial suspension of the resolution. When there is a decision on its suspension, the People�s Council�s resolution shall become invalid.

Article 14.- Through the performance of the inspection function or at the proposals of the Ministers, the Heads of the ministerial-level agencies and the agencies attached to the Government or the Vietnam Fatherland Front, the Government shall consider and make proposal to the National Assembly Standing Committee to dissolve the provincial People�s Council if the latter has issued a resolution seriously harming the people�s and State�s interests.

The Standing Board of the provincial or district People�s Council shall coordinate with the People�s Committee of the same level to propose that the People�s Council of the same level consider and decide the dissolution of the immediate lower-level People�s Council if the latter has issued a resolution seriously harming the people�s and State�s interests.

Before proposing to the competent agency the dissolution of the People�s Council of a locality, the Government or the Standing Board of the provincial or district People�s Council and People�s Committee shall have to conduct inspection and make a concrete conclusion on the mistakes of the People�s Council of such locality.

The dissolution of a provincial or district or commune People�s Council shall be reported promptly to the National Assembly Standing Committee and the Government.

Article 15.- This Decree takes effect from November 1st, 1996.

The Ministers, the Heads of the ministerial-level agencies and the agencies attached to the Government, the People�s Councils and the People�s Committees of different levels shall have to implement this Decree.

The Government Commission on Organization and Personnel shall have to supervise and promote the implementation of this Decree and periodically report to the Government and the Prime Minister the implementation�s results.

On behalf of the Government

For the prime Minister

Deputy Prime Minister

PHAN VAN KHAI